There are different types of foreign exchange risk. Transaction exposure can happen if a business transaction is done in foreign currency. For example, your Singapore business buys something in USD, with an agreement to pay a few months later. If the SGD has weakened by the time your payment is due, you could end up paying more than you’d planned.
Translation exposure can happen when you convert currency in your business reports. You can manage this by showing your report in multiple currencies. Economic exposure can happen if your business operates in more than one country, and you can manage it by using a variety of financing sources, operating in more than one place, or carrying out risk-sharing agreements.
This article is mostly on ways to manage transactional exposure, but it’s important to understand how these risks can affect your business, so you can make decisions to protect it.